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What you need to know about National Insurance in 2022-23

author: Helen Fox

By Helen Fox

Two big changes are coming to the way we pay National Insurance contributions this year. Both affect how much of our wages we’ll pay towards National Insurance.

Although the changes will leave most people better off, it’s important to understand each change and what it involves. We’ve gathered together the key information you need to know, so you can see what the changes to your National Insurance contributions (NICs) will mean for you.

Changes to National Insurance contributions

In September 2021, the government announced that from April 2022, the NICs we pay would increase by 1.25%, as part of the Health and Social Care Levy. This levy is designed first to provide more money and ease pressure on the NHS, and then to support additional funding for social care.

It is a permanent change, so it’s not likely that the proportion of our pay that goes towards National Insurance will fall again any time soon.

Who will have to pay more?

This increase applies to Class 1 NICs (which are paid by employees), Class 4 NICs (which are paid by self-employed people with a certain level of profit) and secondary Class 1, 1A and 1B NICs (which are paid by employers). So, virtually everyone who earns enough to pay NICs will be affected by this change.

How much more will you pay?

How much more you’ll pay depends on how much you earn. NICs are paid according to a primary threshold, as well as upper and lower earning limits. For the vast majority of people, the threshold, and therefore the amount of National Insurance you pay, is set as follows:

 

Amount

Proportion paid in NICs in 2021-22

Proportion paid in NICs in 2022-23

Lower earnings limit

£6,240 per year (£520 per month)

0%

0%

Primary threshold

£9,568 per year (£797 per month)

12%

13.25%

Upper earnings limit

£50,270 per year (£4,189 per month)

2%

3.25%

 

If you earn anything less than the primary threshold, even if you earn more than the lower earnings limit, you won’t currently pay any National Insurance.

If you earn enough to pay NICs, then you will also only pay them on money you earn over and above the primary threshold – not your whole salary. If you earn more than the upper earnings limit, you’ll pay a bit extra on the amount you earn over that limit.

Let’s look at an example:

You earn £25,000 a year. Taking the primary threshold into account, this means you’ll pay National Insurance on £15,432 per year, or £1,286 per month.

In the 2021-22 tax year, you will have paid 12% of this in NICs. 12% of £15,432 is £1,851.84. As a monthly contribution, this is £154.32 each month.

In the 2022-23 tax year, your NICs are rising from 12% to 13.25% of your qualifying pay.

You’ll still pay them on £15,432 of your salary over the year. But, the increase means that your NICs now add up to £2,044.74 a year, or £170.40 a month.

This means you’ll be paying £16.08 more in NICs each month, and over the year, this adds up to £192.90 extra being paid.

However, this example doesn’t take into account any money that’s deducted from your salary before money is taken for tax and National Insurance, like payments into a workplace pension. It also doesn’t account for the other change to National Insurance for 2022-23: changes to the primary threshold.

We’ll talk about this now.

Changes to the National Insurance threshold

In the Spring Statement in March 2022, the government announced that from 6th July 2022, the National Insurance primary threshold would be increased. The reason for this is to help with the rising cost of living.

This means you’ll pay National Insurance on a smaller portion of your salary, and so should receive more in your pocket as a result.

How much will the new primary threshold be?

From 6th July 2022, the primary threshold will be £12,570 per year (£1,047.50 per month). If this number sounds familiar, it’s because it’s also your Personal Allowance – the amount you can earn before you have to start paying income tax.

In a nutshell, this means that if you earn £12,570 per year or less, you won’t pay any income tax or National Insurance.

What will this mean for your contributions?

Let’s look at that example again to see how changing the primary threshold will affect your contributions. Remember, this example doesn’t account for any pre-tax deductions you pay, for example for a workplace pension.

Remember, you earn £25,000 a year.

From July 2022 onwards, the primary threshold will be £12,570 per year. This means you’ll pay NICs on £12,430 each year (£1,035.83 per month).

The rate you pay NICs at is still 13.25%. 13.25% of £12,430 is £1,646.98. As a monthly contribution, this works out at £137.25.

What do these changes mean for you?

Taking both changes into account, most people will pay less in NICs in 2022-23 than they did during the 2021-22 tax year. Some people will stop paying NICs at all as a result of these changes.

Using our example, someone who earns £25,000 would pay roughly £100 less in NICs over the year than they did in 2021-22. This is the case despite their NICs increasing for the first few months of the tax year.

The BBC worked out that anyone who earns up to £34,000 will be better off because of these two changes. Anyone who earns more will be slightly worse off: someone who earns £50,000 a year would pay £197 more in NICs over the year (£16.41 per month) than they did last tax year.

Disclaimer: All information and links are correct at the time of publishing.

author: Helen Fox

By Helen Fox

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